Volume 12, Issue 6, June 2024

Impact Factor: 8.379

 International Journal of Innovative Research in Computer and Communication Engineering
| e-ISSN: 2320-9801, p-ISSN: 2320-9798| www.ijircce.com | |Impact Factor: 8.379 | A Monthly Peer Reviewed & Referred Journal |

|| Volume 12, Issue 6, June 2024 ||

| DOI: 10.15680/IJIRCCE.2023.1206055 |

UPI Fraud Detection Using Machine Learning

Selvi P, Suryadharshan S
Assistant Professor, Department of CSE, Jayam College of Engineering and Technology, Dharmapuri,
Tamil Nadu, India
Student, Department of Master of Computer Application, Jayam College of Engineering and Technology, Dharmapuri,
Tamil Nadu, India

ABSTACRT: UPI fraud detection is presently the most frequently occurring problem in the present world. This is due
to the rise in both online transactions and e-commerce platforms. UPIfraud generally happens when the card was stolen
for any of the unauthorized purposes or even when the fraudster uses the UPI information for his use. In the present
world, we are facing a lot of UPI problems. To detect the fraudulent activities the UPIfraud detection system was
introduced. This project aims to focus mainly on machine learning algorithms. The algorithms used are random forest
algorithm and the Adaboost algorithm. The results of the two algorithms are based on accuracy, precision, recall, and
F1-score. The ROC curve is plotted based on the confusion matrix. The Random Forest and the Adaboost algorithms
are compared and the algorithm that has the greatest accuracy, precision, recall, and F1-score is considered as the best
algorithm that is used to detect the fraud.

I. INTRODUCTION

1.1 OVERVIEW
Mobile payment has gained significant popularity as a mainstream payment method, leading to a high volume of
transactions on online trading platforms. Unfortunately, this popularity also attracts criminals who exploit the complex
network environment to commit fraud. Such fraudulent activities not only harm consumers but also impede the healthy
growth of the online economy. Consequently, effective transaction fraud detection becomes a vital tool in combating
network transaction fraud.

Traditional fraud detection approaches primarily rely on statistical and multi-dimensional analysis techniques.
However, these verification based methods struggle to uncover the underlying patterns in transaction data, limiting their
Traditional fraud detection approaches primarily rely on statistical and multi-dimensional analysis techniques.
However, these verification based methods struggle to uncover the underlying patterns in transaction data, limiting their
In 2018, Zhaohui Zhang proposed a reconstructed feature convolutional neural network prediction model specifically
tailored for transaction fraud detection. This model demonstrated improved stability and classification effectiveness
compared to other convolutional neural network models. However, a challenge remains in achieving high detection
accuracy due to imbalanced sample labels. To address this, the paper introduces two fraud detection algorithms: one
based on a Fully Connected Neural Network and another utilizing XGBoost. The former algorithm integrates two
neural network models with different cross-entropy loss functions, enabling a quick and convenient design process for
the combined model. The latter algorithm leverages Hyper opt to optimize the XGBoost classifier, resulting in a fraud
detection model with superior performance by selecting the best parameters. These two algorithms serve different
application scenarios.

1.2. Fraud Detection

We are living in a world which is rapidly adopting digital payments systems. UPI and payments companies are
experiencing a very rapid growth in their transaction volume. In third quarter of 2018, PayPal Inc (a San Jose based
payments company) processed 143 billion USD in total payment volume [4]. Along with this transformation, there is
also a rapid increase in financial fraud that happens in these payment systems. An effective fraud detection system
should be able to detect fraudulent transactions with high accuracy and efficiency. While it is necessary to prevent bad
actors from executing fraudulent transactions, it is also very critical to ensure genuine users are not prevented from
accessing the payments system. A large number of false positives may translate into bad customer experience and may
lead customers to take their business elsewhere. A major challenge in applying ML to fraud detection is presence of
highly imbalanced data sets. In many available datasets, majority of transactions are genuine with an extremely small
percentage of fraudulent ones.

IJIRCCE©2024 | An ISO 9001:2008 Certified Journal | 8764

 International Journal of Innovative Research in Computer and Communication Engineering
| e-ISSN: 2320-9801, p-ISSN: 2320-9798| www.ijircce.com | |Impact Factor: 8.379 | A Monthly Peer Reviewed & Referred Journal |

|| Volume 12, Issue 6, June 2024 ||

| DOI: 10.15680/IJIRCCE.2023.1206055 |

1.3 Problem Statement

Machine Learning is revolutionizing the way organizations detect and prevent fraud. From utilizing advanced fraud
detection algorithms to detect suspicious activity to preventing hackers from accessing sensitive data, Machine
Learning is making a huge impact on organizations’ fraud prevention efforts.

In this blog, we will explore the benefits, limitations, and use cases of machine learning for fraud detection. We will
delve into how machine learning can empower businesses to detect and prevent fraudulent activities, highlighting the
role of unsupervised learning algorithms and the expertise of ML engineers. Additionally, we will discuss the impact of
machine learning on fraud prevention strategies and the advantages of adopting this technology.

II. LITERATURE SURVEY

1. ONLINE TRANSACTIONS FRAUD DETECTION USING MACHINE LEARNING

Author- Ms. KishoriDhanajiKadam, Ms. Mrunal Rajesh Omanna, Ms. Sakshi Sunil Neje, Ms. Shraddha Suresh Nandai
Year-2023
Now a days Digital transactions are rapidly increasing as it results in increasing online payment frauds too. In fact,
according to the Reserve Bank of India, comparing March 2022 to March 2019, digital payments have risen in volume
and value by 216% and 10%, respectively. People are starting to go all-in with digital transactions, but one can’t deny
the security issues that loom, and know-how when it comes to online payments. Few years ago, we could have barely
seen the online payment, but today UPI payment QR code installed at doorstep.

2. Fraud Detection using Machine Learning

Author- Aditya Oza - [email protected]
Year-2019
Recent research has shown that machine learning techniques have been applied very effectively to the problem of
payments related fraud detection. Such ML based techniques have the potential to evolve and detect previously unseen
patterns of fraud. In this paper, we apply multiple ML techniques based on Logistic regression and Support Vector
Machine to the problem of payments fraud detection using a labeled dataset containing payment transactions. We show
that our proposed approaches are able to detect fraud transactions with high accuracy and reasonably low number of
false positives.

3. Predictive-Analysis-based Machine Learning Model for Fraud Detection with Boosting Classifiers
Author- M. Valavan's, S. Rita's
Year-2023
Fraud detection for credit/debit card, loan defaulters and similar types is achievable with the assistance of Machine
Learning (ML) algorithms as they are well capable of learning from previous fraud trends or historical data and spot
them in current or future transactions. Fraudulent cases are scant in the comparison of non-fraudulent observations,
almost in all the datasets. In such cases detecting fraudulent transaction are quite difficult. The most effective way to
prevent loan default is to identify non-performing loans as soon as possible. Machine learning algorithms are coming
into sight as adept at handling such data with enough computing influence. In this paper, the rendering of different
machine learning algorithms such as Decision Tree, Random Forest, linear regression, and Gradient Boosting method
are compared for detection and prediction of fraud cases using loan fraudulent manifestations. Further model accuracy
metric have been performed with confusion matrix and calculation of accuracy, precision, recall and F-1 score along
with Receiver Operating Characteristic (ROC )curves.

4. Fraud Detection Using Machine Learning and Deep Learning

Author- M. Valavan's, S. Rita's
Year-2023
Fraud detection is a critical task in various industries, aiming to identify and prevent fraudulent activities. In this report,
we explore different machine learning models and the impact of applying Borderline SMOTE, a data augmentation
technique, on their performance. We evaluate the precision, recall, and area under the precision-recall curve (AUPRC)
metrics before and after applying Borderline SMOTE. Our findings indicate that Borderline SMOTE does not improve
the results significantly for fraud detection in this dataset. Despite the scarcity of fraud instances, the generated
synthetic data introduces noise and adversely affects most models’ performance. Decision Trees and Random Forest,
leveraging the inherent nature of fraud occurrences as closely related and rare events, outperform other models in this
scenario. Logistic Regression, Support Vector Machines (SVM), Adaboost, and Neural Networks show limitations in
effectively capturing the intricacies of fraud patterns in this dataset.

IJIRCCE©2024 | An ISO 9001:2008 Certified Journal | 8765

 International Journal of Innovative Research in Computer and Communication Engineering
| e-ISSN: 2320-9801, p-ISSN: 2320-9798| www.ijircce.com | |Impact Factor: 8.379 | A Monthly Peer Reviewed & Referred Journal |

|| Volume 12, Issue 6, June 2024 ||

| DOI: 10.15680/IJIRCCE.2023.1206055 |

III. PROJECT DECRIPTION

EXISTING SYSTEM
 To detect counterfeit transactions, three machine-learning algorithms were presented and implemented.
 There are many measures used to evaluate the performance of classifiers or predictors, such as the Gradient Boost
Classifier, Vector Machine, Random Forest, and Decision Tree.
 These metrics are either prevalence dependent or prevalence-independent.
 Furthermore, these techniques are used in UPI fraud detection mechanisms, and the results of these algorithms
have been compared.

Disadvantages
 Mobile payment has gained significant popularity as a mainstream payment method, leading to a high volume of
transactions on online trading platforms.
 Unfortunately, this popularity also attracts criminals who exploit the complex network environment to commit
fraud. Such fraudulent activities not only harm consumers but also impede the healthy growth of the online
economy.
 Consequently, effective transaction fraud detection becomes a vital tool in combating network transaction fraud.

IV. PROPOSED SYSTEM

 Various modern techniques like artificial neural network

 Different machine learning algorithms are compared, including Auto Encoder, Local Outlier Factor, Kmeans
Clustering.
 This project uses various algorithm, and neural network which comprises of techniques for finding optimal
solution for the problem and implicitly generating the result of the fraudulent transaction.
 The main aim is to detect the fraudulent transaction and to develop a method of generating test data.
 This algorithm is a heuristic approach used to solve high complexity computational problems.
 The implementation of an efficient fraud detection system is imperative for all UPI issuing companies and their
clients to minimize their losses.

ADVANTAGES
 A typical organization loses an estimated 5% of its yearly revenue to fraud. In this course, learn to fight fraud by
using data. Apply supervised learning algorithms to detect fraudulent behavior based upon past fraud, and use
unsupervised learning methods to discover new types of fraud activities.
 Fraudulent transactions are rare compared to the norm. As such, learn to properly classify imbalanced datasets.
 The course provides technical and theoretical insights and demonstrates how to implement fraud detection models.
Finally, get tips and advice from real-life experience to help prevent common mistakes in fraud analytics.

V. SYSTEM CONFIGURATION

H/W SYSTEM CONFIGURATION:-

 Processor – Intel core2 Duo
 Speed - 2.93 Ghz
 RAM – 2GB RAM
 Hard Disk - 500 GB
 Key Board - Standard Windows Keyboard
 Mouse - Two or Three Button Mouse
 Monitor – LED

S/W SYSTEM CONFIGURATION:-

 Operating System: XP and windows 7
 Python coding
 s/w –googlecolabs,or spider

IJIRCCE©2024 | An ISO 9001:2008 Certified Journal | 8766

 International Journal of Innovative Research in Computer and Communication Engineering
| e-ISSN: 2320-9801, p-ISSN: 2320-9798| www.ijircce.com | |Impact Factor: 8.379 | A Monthly Peer Reviewed & Referred Journal |

|| Volume 12, Issue 6, June 2024 ||

| DOI: 10.15680/IJIRCCE.2023.1206055 |

VI. MODULES DESCRIPTION

DATASET AND ANALYSIS

In this project, we have used a Kaggle provided dataset of simulated mobile based payment transactions. We analyze
this data by categorizing it with respect to different types of transactions it contains. We also perform PCA - Principal
Component Analysis - to visualize the variability of data in two dimensional space. The dataset contains five categories
of transactions labeled as ’CASH IN’, ’CASH OUT’, ’DEBIT’, ’TRANSFER’ and ’PAYMENT’ - details are provided

UPIFRAUD
Credits are typically used to refer to electronic financial transactions made without the use of physical cash. A UPI that
is extensively used for online transactions is a small piece made up of thin plastic material with credit services and
customer details. Fraudsters use credit cards to make unlawful transactions that result in massive losses to banks and
card holders. Moreover, the invention of counterfeit cards has aided fraudsters in performing illicit transactions more
easily. In general, it is regarded as illegitimate to use the card without the proper owners’ authorization. By obtaining
access to a certain account illegitimately, any transaction that is carried out is considered as fraudulent. UPI fraudulent
activities can be divided into two aspects, namely, offline and online fraud. In offline fraudulent activity, the fraudsters
conduct their illicit transactions with stolen credit cards such as genuine card holders, while online fraudsters conduct
their activities in online transactions through Internet Online fraud.

FINANCIAL STATEMENT FRAUD

Fraud in financial statements involves forging financial reports to claim that a company is more profitable than usual,
avoid the payment of taxes, increasing stock prices, or obtaining a bank loan. It can also be regarded as the confidential
records generated by organizations that contain their financial records that comprise their expenses, profits made,
income loans, etc. These statements also comprise some write-ups made by management for discussing business
performances and predicted future tendencies.

INSURANCE FRAUD
Insurance fraud can be defined as the act of misusing an insurance policy for gaining illegitimate benefits from an
insurance business. Usually, insurance is made to protect the organization’s transactions or individual’s transactions
against any financial risks. The main sectors of target by fraudulent insurance claims include healthcare and automobile
insurance companies although home and crop insurance fraudulent also occur, however, there is a paucity of the
literature on both. It has been estimated recently that the total cost of insurance fraud in the United States is over a
billion USD yearly and it is finally passed on to consumers in the form of higher insurance premiums.
In order to cover the relevant costs of theft or accidental damages to a car, an agreement between the insurance provider
and the insured person or organization is typically involved in automobile insurance claims. Individual fraudsters are
capable of committing fraudulent claims, and one method of committing fraud is through deception during the claims
process. Evidence of organized groups working together to conduct insurance fraud also exists.

VII. CONCLUSION

Online transaction are increasing with UPI, cards, net banking as it is easier and saves time of the customer purchase.
But as the online transaction is increasing so is the fraud. Hence using machine learning algorithms and ANN model, an
attempt has been made to gain the knowledge about the fraud and genuine transaction. With the increasing usage of
ecommerce and online shopping, customer’s vital information like card’s CVV, UPI pin, OTP, passwords etc. are
always vulnerable. The reason for rise in fraud cases is that fraudsters easily barge into the customers private
information. Even the banking systems are vulnerable to frauds, also the fraudsters are finding new ways of fraud like
identity theft from social media platform so the fraud prevention and detection is an ever evolving process. As the
online frauds are ever increasing, the traditional way of detecting and preventing frauds are being replaced by various
machine learning algorithms.

REFERENCES

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IJIRCCE©2024 | An ISO 9001:2008 Certified Journal | 8767

 International Journal of Innovative Research in Computer and Communication Engineering
| e-ISSN: 2320-9801, p-ISSN: 2320-9798| www.ijircce.com | |Impact Factor: 8.379 | A Monthly Peer Reviewed & Referred Journal |

|| Volume 12, Issue 6, June 2024 ||

| DOI: 10.15680/IJIRCCE.2023.1206055 |

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